Rob Mason

Rob Mason asked about the confidence level in the second-half margin outlook, given Q2 challenges and ongoing footprint optimization, and whether margin ramp-up would be more significant in Q3 or Q4. He also inquired about the timing of recovery for the first-fit on-road/truck business, specifically if it's concentrated in Q4.

Answer

Rich Lewis, Incoming President and CEO, expressed confidence in volume recovery for OE and A&D, citing backlogs and focused efforts on supply chain issues. He expects restructuring costs to decrease and benefits to feather in, with power generation productivity accelerating. Brad Pogalz, Chief Financial Officer, added that second-half margin improvement also comes from expense leverage, with expenses maintained at first-half levels. Mr. Pogalz confirmed that the recovery for the first-fit on-road/truck business is expected in the second half, particularly late in Q4, with some green shoots and share gains.

Rob Mason questioned the confidence level in the second-half margin outlook, given the Q2 challenges and ongoing footprint optimization efforts, asking if margins would step up more meaningfully in Q3 or Q4. He also asked about the recovery in the on-road first-fit business, specifically if it's expected to be concentrated in Q4.

Answer

Rich Lewis, Incoming President and CEO, expressed confidence in the second-half margin outlook, citing expected volume recovery in OE and A&D (supported by backlogs), progress on restructuring work (with costs decreasing and benefits emerging), and continued productivity improvements in PowerGen. Brad Pogalz, Chief Financial Officer, added that expense leverage from disciplined cost controls would also contribute significantly to second-half margin improvement. Regarding the on-road first-fit business, Pogalz confirmed that recovery is expected in the late second half, noting green shoots, public data suggesting increased truck production, and Donaldson's continued share gains with OEMs.

Rob Mason asked for context on the decision to raise guidance after Q1, which is somewhat uncharacteristic, especially given regional caution. He questioned if confidence was primarily self-help-driven or if sales outlook within ranges was moving up. He also pressed for details on how the PowerGen business, despite being sold out, is expected to grow this year within the mid-single-digit IFS context.

Answer

CEO Tod E. Carpenter explained that confidence stems from a strong, diversified portfolio, share gains, and robust performance in aftermarket and Life Sciences (food & beverage), where 'highs are higher highs than the lows are on the step down,' leading to transparently raising guidance. For PowerGen, CEO Tod E. Carpenter stated the biggest challenge is ramp-up due to full capacity, expecting mid-single-digit growth with potential upside from execution, but also risks of project delays if customer sites aren't ready.

Rob Mason questioned the filtering process for Novanta's robust M&A pipeline, particularly concerning medical, consumables, and embedded software opportunities, seeking details on how the company ensures protection and competitive moats for these investments. He also asked for an update on the first-quarter contribution of the Keonn acquisition, noting its project-oriented nature and strong performance.

Answer

Matthijs Glastra, Chair and CEO, outlined Novanta's M&A strategy, emphasizing continued growth in medical exposure (now ~55% of revenue), expansion in advanced surgery beyond endoscopy/arthroscopy, and leveraging the double-digit growing medical consumables business. He clarified that 'embedded software' refers to intelligent subsystems combining hardware and software, a highly protected area with deep proprietary know-how. Robert Buckley, CFO, detailed the financial discipline for acquisitions: ROIC exceeding cost of capital by year 2 (bolt-on) or year 5 (larger), faster top-line growth, non-dilutive gross margins (50%+), higher cash flow conversion, and maintaining leverage below 3.5x. Regarding Keonn, Robert Buckley stated it contributed approximately $9 million in incremental revenue, exceeding deal model expectations for both 2025 and 2026. He highlighted its recurring revenue stream from middleware software solutions and strategic applicability in the hospital environment, supported by a minority investment in a Spanish business for beta testing.

Rob Mason from Baird asked about the robustness of Novanta's M&A pipeline, particularly regarding the capital raise and priority areas like medical, consumables, and embedded software. He sought details on the filtering process for embedded software acquisitions to ensure a strong moat and protection, and also inquired about valuation fluidity. Additionally, he asked for the first-quarter contribution of the Keonn acquisition before it transitions into organic growth.

Answer

Matthijs Glastra reiterated Novanta's consistent focus on increasing medical exposure (now nearly 55% of revenue), both organically and through M&A, leveraging strong OEM relationships. He detailed two key areas: expanding category leadership in endoscopy/arthroscopy and building on the medical consumables business (15% of revenue, double-digit growth). For embedded software, Matthijs Glastra clarified it refers to "Intelligent subsystems" where software and hardware are intrinsically combined to create functionality, not application-layer software. He emphasized that this vertical integration solves problems better, faster, and cheaper for customers, is well-protected by deep proprietary know-how, and runs directly on hardware/firmware. Robert Buckley outlined financial discipline for acquisitions: return on invested capital exceeding cost of capital by year two (or five for larger deals), free cash flow accretive, faster top-line growth than Novanta, non-dilutive gross margins (50%+), high cash conversion, and maintaining a leverage ratio below 3.5x. Regarding Keonn, Robert Buckley stated that its contribution drives the delta between reported and organic revenue, noting it has both project-based and recurring revenue streams from software solutions. He mentioned a small minority investment in a similar Spanish business to beta test products in hospitals and confirmed Keonn is outperforming its deal model for both 2025 and 2026, with strong momentum in retail and progress in medical applications.

Rob Mason asked about the rapid pace of innovation in Keysight's wireline business, specifically the transition from 800G to 1.6T and 3.2T research. He sought to understand the mix of recapitalization versus upgrade activity and whether this accelerated spend cycle differs from past experiences. He also inquired about the pro forma growth tracking of the recently acquired Spirent and OSG businesses in the first half of the current fiscal year.

Answer

Satish Dhanasekaran, President and CEO, explained that Keysight is currently seeing concurrent designs, with 800G ramping, 1.6T accelerating in R&D, and discussions around 3.2T. He believes this concurrency will continue for the next couple of years due to the need for the right networking fabric to match compute in AI clusters, playing to Keysight's highly differentiated wireline portfolio. Neil Dougherty, Executive Vice President and CFO, stated that Keysight took a conservative approach to planning for the acquired businesses (Spirent, OSG) this year due to integration activities. He confirmed that the acquisitions are tracking in line with expectations to deliver $375 million in revenue for fiscal 2026, with synergy realization also on plan.

Rob Mason asked about the impact of the accelerating pace of innovation in wireline (800GB to 1.6T to 3.2T) on Keysight's spend cycle, specifically the mix of recapitalization versus upgrade activity, and how recent acquisitions like Spirent and OSG are tracking on a pro forma growth basis.

Answer

President and CEO Satish Dhanasekaran explained that the industry is experiencing concurrent designs, with 800GB ramping, 1.6T accelerating in R&D, and discussions around 3.2T, driven by the need for networking fabric to match compute in AI clusters. He emphasized Keysight's highly differentiated portfolio for the wireline ecosystem. EVP and CFO Neil Dougherty stated that the acquisitions are tracking in line with expectations, with conservative planning, and are on track to deliver the $375 million in revenue communicated, with synergy realization also on plan.

Rob Mason asked Satish Dhanasekaran about the positioning business acquired with Spirent, inquiring how this new capability layers across Keysight's portfolio and where Keysight's relationships can add incremental value. He also asked CFO Neil Dougherty for guidance on the cadence of M&A revenue contribution for the year, specifically noting Spirent's historical second-half weighting.

Answer

President and CEO Satish Dhanasekaran expressed excitement about Spirent's positioning capabilities (simulating satellite environments in a lab), seeing significant upgraded opportunities in automotive (autonomous systems, integrated sensing and communication), and aerospace defense (jamming, spoofing). Kailash Narayanan, President of the Communication Solutions Group, added that as LEO and NTN applications scale, Keysight plans to bundle these capabilities with its physical and protocol layer solutions, enhancing its portfolio for satellite constellation and orbital emulation. CFO Neil Dougherty stated that M&A revenue is expected to skew towards Q1 (approaching 30%), with the remaining three quarters being relatively equal, based on prior business behavior, but noted that integration might shift this alignment.

Rob Mason asked Satish Dhanasekaran about the positioning business acquired with Spirent, inquiring how this new capability would layer across Keysight's portfolio, particularly in aerospace defense, and where Keysight's existing relationships could add incremental value. He also asked Neil Dougherty for guidance on the cadence of M&A revenue contribution for the year, noting that Q1 guidance seemed above the typical run rate.

Answer

Satish Dhanasekaran, President and CEO, expressed excitement about Spirent's positioning capabilities (simulating satellite environments in a lab), seeing significant upgraded opportunities in automotive, 6G, and aerospace defense. Kailash Narayanan, President of the Communication Solutions Group, added that they see opportunities to bundle these capabilities with existing physical and protocol layer solutions, enhancing their portfolio for NTN design activity, satellite constellation emulation, and channel emulation. Neil Dougherty, CFO, stated that M&A revenue is roughly 75% CSG and 25% EISG, with close to 30% expected in Q1 and the remaining three quarters relatively even, based on prior business behavior.

Rob Mason inquired about the strong detection growth in Q4 2025, specifically whether large orders explained the delta from high single-digit expectations, and then asked about the expected cadence for the fire service segment throughout 2026 given well-documented Q4 headwinds.

Answer

President and CEO Steve Blanco confirmed that large orders significantly contributed to the detection growth, pushing it to 12% organically for the year, and noted underlying demand remains strong. For fire service, Steve Blanco and Stephanie Sciullo (President, Americas Segment) explained that AFG funding delays would likely shift orders into the first half of 2026, followed by a more standard second-half demand cycle, expecting consistent growth throughout the year.

Rob Mason inquired about the strong Q4 2025 detection growth, asking if large orders were the primary driver for exceeding high single-digit expectations, and also sought clarity on the expected cadence of fire service performance throughout 2026 given prior quarter headwinds.

Answer

President and CEO Steve Blanco confirmed that large orders significantly contributed to the detection growth, pushing it to 12% for the year, and anticipates mid-single-digit growth for detection in 2026. Regarding fire service, Mr. Blanco explained that delayed AFG orders are expected to materialize in the first half of 2026, with the overall year following a more typical second-half weighted pattern. Stephanie Sciullo, President of Americas Segment, added that consistent revenue growth is expected for fire service throughout the year.

Rob Mason inquired about the expected lack of normal seasonal uplift in Q4 2025, specifically if it's solely due to fire service issues, and sought clarification on how AFG funding delays and the U.S. government shutdown impact customer order placement. He also asked about the normalized SG&A rate for future quarters.

Answer

Julie Beck, Senior Vice President and CFO, confirmed that Q4 2025 would not see much normal seasonal uplift, remaining relatively consistent with Q3, primarily due to fire service dynamics. Steve Blanco, President and CEO, elaborated that delays in AFG funding awards and the government shutdown slow down the process for fire departments to accept awards and place orders, impacting the typical late Q3/early Q4 order pace. Ms. Beck also stated that Q4 SG&A is expected to return to more normal levels after Q3's lower rate.

Rob Mason asked if Zebra Technologies anticipates customers pulling forward projects to get ahead of price increases or memory uncertainty. He also inquired about the expected return to growth in machine vision, specifically whether the recovery is driven by historically strong verticals or new ones.

Answer

CFO Nathan Winters stated that no pull-forward activity is expected in Q1 guidance, as price increases were just announced and past experience shows minimal pull-in due to administration through channels and honoring prior concessions. He also noted that the incremental price increase announced this week is not yet incorporated into the guide. CEO Bill Burns added that partners are encouraging early discussions for supply visibility, not price savings. Regarding machine vision, Bill Burns confirmed sequential growth in Q4 and expected solid growth for 2026, driven by recovery in both transportation and logistics (TNL) and manufacturing, with efforts to diversify the customer pipeline and enhanced offerings like Photoneo.

Rob Mason of RW Baird asked if Zebra Technologies anticipates any customer pull-forward activity in Q1 due to recent price increases or general uncertainty around memory. He also inquired about the expected return to growth in machine vision, specifically whether recovery is driven by historically strong verticals or new market opportunities.

Answer

Nathan Winters, Chief Financial Officer, stated that no pull-forward activity was incorporated into the Q1 guidance, as price increases were just announced and their administration through the channel typically limits such behavior. He added that the incremental price increase announced this week is not yet incorporated into the guide, pending monitoring of its impact. Bill Burns, Chief Executive Officer, noted that machine vision saw sequential growth in Q4, with new wins in both transportation & logistics (T&L) and manufacturing (e.g., automobile manufacturing). He highlighted efforts to diversify the customer pipeline and emphasized the strong value proposition around ease of use and a unified software platform, expecting solid growth in 2026 as the market recovers.

Rob Mason asked for details on EMEA demand trends, including month-to-month or quarterly performance into Q4, given its softness. He also inquired about the drivers of Asia Pacific's double-digit growth over the past five quarters and its forward outlook, as well as the trend and drivers of stock compensation.

Answer

CEO Bill Burns provided a regional breakdown: North America saw strength in mobile computing and printing, with some Q3 pull-in for peak demand. EMEA remained mixed, similar to Q2, with Northern Europe performing well but Germany and France challenged. Asia Pacific showed strong growth, driven by investments in Japan (e.g., postal service applications) and strength in India, Australia, and New Zealand. Latin America achieved a record quarter with broad-based strength. CFO Nathan Winters explained that stock compensation saw an anomaly in Q3 due to a true-up for performance shares and earlier accounting changes, expecting normalization in Q4 and 2026.

Rob Mason asked for more detail on EMEA demand trends, including month-to-month or quarterly trends into Q4, given its continued softness. Conversely, he inquired about the drivers of Asia Pacific's double-digit growth over the past five quarters, whether it's broadening customer base or project-specific, and its outlook. He also asked about the increase in stock compensation, its expected trend into 2026, and its drivers.

Answer

CEO Bill Burns provided a regional breakdown: North America saw strength in mobile computing and printing, with some Q3 demand pull-in for peak season, but Canada was softer. EMEA showed mixed performance, with Northern Europe doing well but Germany and France (especially manufacturing/retail) challenged. Asia Pacific's strong growth was driven by investments in Japan (e.g., postal service wins) and growth in India, Australia, and New Zealand. Latin America also had a record quarter. CFO Nathan Winters explained that the stock comp increase was due to a plan design change accelerating expense and a Q3 true-up for performance shares, which was an anomaly, expecting normalization in Q4 and 2026.

Rob Mason asked about the gating factors and potential pull-in for second-wave data center customers, and if supply constraints would disproportionately impact their ramps. He also sought clarification on whether the industrial and medical (I&M) segment's expected growth for the next couple of quarters was sequential from Q4, considering Q1 seasonality.

Answer

Steve Kelley (CEO) noted that second-wave data center customers require less engineering work, but hyperscalers likely have an advantage in processor/memory contention, potentially impacting second-wave ramps. Paul Oldham (EVP and CFO) clarified that Q1 growth is primarily semi-driven, implying a flattish I&M sequentially, which is an improvement given Q1 seasonality, with growth expected throughout the year paced by the macroeconomy. Data center is also expected to be flattish in Q1 due to product transitions.

Rob Mason asked about the gating factors and potential for pull-ins for second-wave data center customers, and how supply constraints might impact their ramp. He also sought clarification on the industrial and medical segment's growth, specifically if it implies sequential growth off Q4 2025 or a flattish Q1 due to seasonality.

Answer

CEO Steve Kelley noted that second-wave data center customers require less engineering work from Advanced Energy. He suggested that hyperscalers might have an advantage in processor and memory contention, potentially impacting second-wave ramps, and anticipates challenges in securing desired memory and processors this year. CFO Paul Oldham clarified that Q1 growth is primarily expected from semiconductors, implying a flattish quarter for industrial and medical and data center, for different reasons. He stated that a flattish Q1 for industrial and medical would be an improvement given typical seasonality, with growth expected over the year as market conditions improve, though the broader macroeconomy remains a wild card. Data center's flattish Q1 is attributed to product transitions, with solid demand and ramp expected thereafter.

Rob Mason asked for an update on the expected headwind from changes in the Cat JV in the Field Systems business, specifically whether the anticipated 'couple of points' headwind played out as expected in 2025 and its implications for 2026. He also asked CFO Phil Sawarynski about the drivers behind the expected margin expansion in the T&L segment for 2026, particularly regarding the removal of stranded costs, and any investment impacting Field Systems' margin expansion.

Answer

President and CEO Rob Painter confirmed that the Cat JV headwind played out as expected, related to software conversions and machine control guidance as a service (WorksPlus). He noted WorksPlus was more successful than anticipated, with 50% of wins coming from new logos, expanding the addressable market and providing a 'double positive' for growth. CFO Phil Sawarynski attributed T&L margin expansion to growth leverage and the expected removal of stranded costs throughout 2026. He reiterated the company's overall 50 basis points EBITDA expansion for 2026, balancing reinvestment with operating leverage.

Rob Mason asked about the model conversion burden in the Field Systems business, specifically if the expected CAD/JV headwind in 2025 played out as anticipated and how it might carry over into 2026. He also inquired about the overall margin guidance for 2026, noting higher expansion expected in the Transportation and Logistics (TNL) segment, asking if this reflects the removal of stranded costs and if there's any specific investment impacting Field Systems' margin expansion.

Answer

Rob Painter (President and CEO, Trimble) confirmed that the CAD/JV headwind played out as expected in 2025, entirely related to software conversions and machine control guidance as a service (WorksPlus). He clarified that WorksPlus has been more successful than anticipated, with 50% of wins being new logos, representing addressable market expansion rather than just a headwind, and facilitating bundled offerings. Phil Sawarynski (CFO, Trimble) attributed anticipated higher margin expansion in TNL to growth leverage and the expected removal of some stranded costs from the mobility divestiture throughout 2026. He reiterated the company's overall expectation of 50 basis points EBITDA expansion for 2026, balancing reinvestment for growth with operating leverage.

Rob Mason inquired about the functionality of Mirion's strategic partnership with Westinghouse concerning new nuclear builds, and how Paragon's potential relationship with Westinghouse might integrate into this.

Answer

Thomas Logan, Founder, Chairman and CEO, Mirion, emphasized Westinghouse as a crucial customer and expressed satisfaction with the NFMS agreement. He highlighted that Paragon's acquisition would enhance Mirion's relevance and solution set for Westinghouse and other nuclear reactor designers, improving positioning for both system upgrades and new build activities.

Rob Mason inquired about the Westinghouse strategic partnership, how it functions on the new build side, and how Paragon's potential relationship with Westinghouse would integrate into this commentary.

Answer

Thomas Logan, Founder, Chairman and CEO, highlighted Westinghouse as a critically important historical customer. He expressed confidence that with Paragon, Mirion's relevance and solution set for Westinghouse and other nuclear reactor designers would swell, improving positioning for both new build activity and system upgrades.

Rob Mason of Baird asked about the deployment progress of break pack systems and sought clarification on whether the complexity in lower-margin projects was due to new features or installation challenges.

Answer

CEO Rick Cohen confirmed a second break pack system is being deployed, with more to follow, and noted a redesign of the mini bot has improved margins and customer satisfaction. CFO Carol Hibbard clarified that the lower margins on certain complex projects were not due to new features but rather because they are older projects that started with lower margins. As these are completed, the overall margin mix will improve.